OPINION: Why the OFT should look at Mr Beatty’s post and think again

Exasperated, Paisley retailer Des Barr this week went out and shopped for 230 copies of the Daily Mail and then posted them at his own expense to Kevin Beatty, group managing director of the company that publishes the newspaper.

His challenge to Mr Beatty was a simple one – see how long it takes you to put 230 posters into these papers on a weekday morning before you home deliver the copies.

Mr Barr’s story illustrates well the frustration that news retailers have with the newspaper supply chain. It shows how publishers can act like feudal landlords when it comes to working with newsagents – increasing at will the rent they extract from the goodwill and investment of small businesses.

Mr Barr has built a home news delivery business based on exceptional service. He has canvassed local people and won their newspaper orders. Ironically, he is full of praise for Associated Newspapers, which Mr Beatty leads. It has pumped millions into supporting delivered newspaper sales, Mr Barr says.

However its latest sales development idea was to provide free Frozen Planet posters to Mail readers across seven days from Saturday through Friday, with no insertion charge paid to the retailer. This promotion works fine if shoppers simply pick up a poster when they are in-store.

But it does not work for the newspaper’s most loyal customers, those who pre-order the Mail and have it delivered to their homes, if the shopkeeper does not insert the poster into the newspaper. For Mr Barr, who sells six times more copies of the Mail than the average shop, there is no option but to insert the posters. And that takes 30 minutes. And he has to insert it in every copy with no real chance of growing his sales.

To cover his costs, he would need a 15 per cent sales uplift, which is not happening. To make a profit, his sales uplift would have to be even higher. The extra margin promised by the Mail for the top performing retailers who increase sales above 10 per cent is capped in a way that will not compensate Mr Barr.

The second problem is that inserting posters Monday through Friday is an extra activity. While he is set up to put inserts into weekend titles, for which he is paid 2p (a sum little changed since the 1980s), he is not set up to do it weekdays. This means that his staff are under time pressure to get the deliveries out. Those who are at school have only a short window of opportunity to work. Extra work means that his customers get their papers late.

The third problem is the precedent that the Mail has set. Mr Barr fears that other publishers will see the success of the scheme (if it is successful) and push through me-too promotions that cost the retailer money and mean deliveries will be late.

Someone at the Mail suggested to Mr Barr that he could simply expect his home news delivery customers to come to the shop and collect their posters. “I would have no business left if I adopted that attitude,” he said. “I want to provide a full service to my customers.”

Mr Barr is torn. He does not like being negative. He accepts that the promotion had a positive intention. Yet, he and his team have had to work much harder for no reward. There is no easy solution.

Tomorrow, the Office of Fair Trading, which has regulated the newstrade since 1993 when it made changes to open up the market, is due to announce whether the Competition Commission should look at the market again. No-one can be optimistic that the OFT or the Competition Commission will come up with a good solution.

Looking back, it is clear that the territorial monopolies that newsagents used to enjoy provided retailers with a bargaining chip with publishers. The problem with a free retail market is that it takes almost no capital and little skill to start selling newspapers (it takes a lot of skill to do it profitably). This means retailers have no leverage and in the 19 years since the OFT opened up the market news retailers have suffered from a steady erosion of their ubiquity and their profitability. Good retailers have compensated by working smarter and working harder. But that doesn’t mean that the newstrade is fair.

For those retailers who love selling newspapers and do a great job, this lack of a level playing field leaves a bitter taste. For newspaper executives who are locked in a battle for survival, this bitterness may seem to be inconvenient. But paying attention to the challenges of selling newspapers well and being generous are more likely to extend the success of the newspaper industry than bring it to a swifter conclusion.